October, 1999Incentives Deal of the Monthfrom Site Selection's exclusive New Plant database

Incentive Package Makes the Difference in Michelin's Pick of South Carolina over Georgia

Local and state incentives were apparently the deal-maker in Michelin North America's (www.michelin.com) recent decision to locate its new US$90 million manufacturing facility in Anderson County, South Carolina. The incentives gave the upstate South Carolina site the win over its closest competitor, a location in Stephens County, Ga.

The Anderson County plant is actually part of Michelin's multi-faceted expansion in South Carolina that will total $400 million in capital investment. Other investments in Michelin's South Carolina expansion will include: a $40 million investment in Michelin's existing Anderson County plant in Sandy Springs that manufactures various semi-finished products; a $90 million investment in Michelin's mold-production plant in Greenville County; a $60 million investment in Michelin's tire plant in Lexington County; and a $30 million investment in Michelin's tire and retreading plant in Spartanburg County.

The new facility in Anderson County, however, was apparently the key element in Michelin officials' decision to undertake the multi-location South Carolina expansion plan.

In addition, the Anderson County site could be in for considerably more investment. Phase II of Michelin's South Carolina expansion plan projects an additional investment of $90 million or more at the Anderson County operation. And over the longer term, the Anderson County location could see another $500 million in capital investment and a new radial-tire manufacturing facility, Michelin North America executives added. Those substantial potential expansions can easily be accommodated due to the 750-acre (300-ha.) site near the Anderson County Airport that Michelin selected.

Michelin's newest investment plans in South Carolina could also mean other expansions at other facilities in the state. In fact, over the next 10 years, Michelin officials say that the company's total capital expenditure in expanding its presence in South Carolina reach $900 million, creating 1,400 new jobs.

$400 Million in Reduced-Rate Industrial Revenue Bonds

To land the new Michelin plant in South Carolina, the Anderson County Council (www.andersonpartnership.com) offered $400 million worth of industrial revenue bonds at reduced rates. The Anderson Council also applied for state grants to help improve infrastructure around the plant, which was another key element in the deal.

Local area economic development officials probably heaved a sigh of relief with the pro-Michelin vote by Anderson County Council. Earlier this year, the county group had become more cautious in granting business location incentives. That caution, say local observers, stems from layoffs at an Owns Corning plant in Andersen County that had previously received tax breaks from the council.

In addition to the bonds approved by the Andersen County Council, the South Carolina Council for Economic Development, an arm of the state Dept. of Commerce (www.callsouthcarolina.com), agreed to provide $17.8 million for Michelin's infrastructure needs at the new Anderson County site. A major portion of those infrastructure funds will go toward building a bypass around Anderson. The bypass will enable trucks from the new Michelin plant to more quickly connect with Interstate 85.

The Anderson County Transportation Committee voted to supplement the state infrastructure funds with $500,000 to help fund roads for the Michelin plant.

Michelin will receive other corporate jobs tax credits and job development credits, say state and local development officials. The exact value of those incentives, however, will depend on the number of new jobs that Michelin creates.

Not a Foregone Conclusion

Michelin North America has been headquartered in Greenville, S.C., for almost a quarter of a century. All told, the company has amassed a South Carolina work force of 9,000 and has South Carolina manufacturing plants in Anderson, Greenville, Lexington, Spartanburg and Winnsboro.

However, it wasn't a foregone conclusion that the new plant that landed in Anderson County would have a South Carolina address, Michelin officials say.

In the past, Michelin has ventured outside the state in setting up its North American facilities. Outside of South Carolina, the company has major manufacturing operations in Ardmore, Okla.; Dothan, Ala.; Fort Wayne, Ind.; Opelika, Ala.; Scottsville, Va.; and Tuscaloosa, Ala. It's also set up four Canadian plants in Bridgewater, Nova Scotia; Granton, Nova Scotia; Kitchener, Ontario; and Waterville, Nova Scotia.
Michelin North America officials haven't released full details of the sites that were competing with Anderson County for the new facility.

After the Anderson County investment was announced, however, it became clear that one of the major contenders was Stephens County, an area in northeast Georgia that sits on the South Carolina border.

Soon after the South Carolina investment went public, Stephens County business leaders huddled with elected state representatives and Georgia Chamber of Commerce officials to discuss how the county could create a more pro-business environment.

Ben Cheek, chairman of First Franklin Financial Corp., said he hopes that Georgia legislators will add to the incentives that communities near the state's borders can offer to attract business.

Stephen Loftin, Georgia Chamber of Commerce vice president of governmental affairs, agreed that strengthening state incentives should be a high priority.

"We don't have to give away the farm, but we do have to do something to compete," Loftin said.

A 16-to-1 Payoff?

As always with major business incentive packages, questions are being bandied about concerning the long-term economic payoff for the area and for the state. This deal, though, is a bit more problematic than most to figure out, since the exact value of the incentives that Michelin will receive hasn't been fully disclosed.

However, Helen Munnerlyn, a spokeswoman for the Commerce Dept., estimated that the benefit to South Carolina outweighs the cost of the incentives by a ratio of 16-to-1. "The risk the state takes is very low," said Munnerlyn, citing Michelin's long, expansive history in South Carolina.

Anderson County officials are estimating that the new Michelin investment will produce between $500,000 and $1 million a year in county taxes.

South Carolina's Commerce Dept. is estimating that Michelin's new investment will produce roughly $15 million in state property taxes over the next 15 years.